Thursday, August 6

10 Quick Advantages and Disadvantages of Credit Cards

A credit card is something that allows you to use cash in advance to pay for goods or services. It is a plastic card which the user can issue from a bank. It helps you buy things on credit and you are liable to pay the amount later. A credit card comes with a credit limit, which is the total cash available to you, and an interest rate. Each time you make a payment, the amount gets deducted from the card. Given below are some of the advantages and disadvantages of credit cards.

Credit cards have lots of benefits and few drawbacks as well. So let us now look into them.

Advantages of Credit Cards:-

The major advantages are listed here,

Keep track of expenses

Credit card statements are available on a monthly basis. It shows how much you have spent during the month. This helps keep a check on the spending pattern. Year-end statements are also available with some credit cards which become helpful during tax payment.

All-time ATM

When a credit card is available with you, there is no need of searching for an ATM machine. The card acts as an all-time ATM. It is not necessary to keep cash with you always. The credit card does the job.

Advantages and Disadvantages of Credit Cards

Company backing

In time of disputes with any merchant, in most of the cases, the credit card company takes your side. If you are not satisfied with any product and the merchant is not ready to take it back, just inform the card company. They will handle it for you.

Interest-free credit

Some credit cards allow interest-free loans with a zero percent period offer. The loan is to be repaid before the 0% period ends. Even though the repayment needs to be quick, it is better to save a little money than paying the interest.

Revolving credit

Credits cards are examples of revolving credit. It does not specify any particular number of payments. You can borrow, payback and re-borrow any number of times you want. If you need urgent cash which can be repaid in one week, then a credit card is the best option because the initial interest rates are generally less.

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Disadvantages of Credit Cards:-

The disadvantages are nothing while comparing to the advantages. Let’s see!

Rise in debt

Credit card money is like a loan with interest. If you are able to pay only the minimum monthly payment, the repayment amount goes on increasing. You may end up in a lot of debt if the amount is not paid back as soon as possible.

Extra charges

Credit cards call for a lot of hidden charges. On top of the interest, there is a fee levied for late monthly payment or no payment at all. There is also a charge on ATM cash withdrawal and a penalty for exceeding the credit card limit. This is subject to the amount levied by your local authorities. All these may seem unimportant or may even be missed out when falling for the credit card trap.

Careless use

Today’s generation just cannot live without credit cards which have become an inevitable part of their lives. Unlike debit cards, credit cards offer more money that is not present in the account. But it has to be used very carefully. You tend to overuse it because a lot of money flows as credit. This may eventually lead to a lot of debt.

Introductory rate trap

People are often attracted by the low introductory rates offered by banks for the credit cards. This is actually a trap into which one easily falls. When the introductory period ends, the interest rate shoots up leaving you open-mouthed and aghast.

Advantages and Disadvantages of Credit Cards

Misuse of stolen cards

Credit card frauds are very common these days. If not very careful, it may be misplaced or stolen by somebody because the card is small in size. It is possible to get your card number from receipts or sites. Some people are highly skilled at this and with all the confidential data they can use the cards for purchases. In case you don’t disable the card at the right time, you will lose a lot of money.

To sum up, one should really be careful before opting for a credit card plan. Always think ahead about how to manage one’s money and how one will pay off the credit card bills before making any significant purchase with the said credit card.

Know More – Debit Card Advantages and Disadvantages

Pros and Cons of Credit Cards

PROS

CONS

Keep track of expenses

Rise in debt

All-time ATM

Extra charges

Company backing

Careless use
Interest-free credit

Introductory rate trap

Revolving credit

Misuse of stolen cards

Save